5 ways Amazon sellers can get more from Amazon

There are several ways Amazon sellers can get more of their money back from Amazon.

Many sellers don’t look into the details of their Amazon business. So long as they get a large payment every settlement, they trust that their accounts are in order.

But that’s not always the case. In fact, many sellers are likely owed hundreds, if not thousands, of dollars in reimbursements for damages or mistakes.

These mistakes can include lost or damaged items at an FBA warehouse or some mistaken charge on a refund.

We’ll go over other areas sellers can look into to reclaim or get the money they are owed back from Amazon.

Business Orders

If you sell B2B on Amazon Business, then chances are you haven’t changed the default payment option.

While not a reimbursement, business order payments can help with cash flow.

It’s common for businesses to have Net 30 terms on Amazon, and some may even have Net 90 terms. While you can get more money through sales to businesses, you won’t receive the proceeds from some sales for at least 30 days. This can seriously restrict cash flow for many sellers.

The default payment option for business orders is that the latest you can be paid is 7 days after the invoice due date. That can mean up to 97 days before sellers are finally paid by businesses with Net 90 terms.

Instead, you can change your business payment setting so that you’re paid immediately after the order is shipped. It’ll cost you an additional 1.5% transaction fee.

View the linked article above for step-by-step instructions on changing your payment options for business orders.

If you need the cash flow, then an additional 1.5% fee isn’t much considering 90 days is enough time for one inventory turnover.

Fraudulent Returns

If you’re not filing SAFE-T claims for reimbursements on fraudulent returns, then you’re losing money on refund fees, your cost of the product, and possibly shipping expenses, not to mention the labor involved.

Many sellers avoid filing reimbursement claims because they feel like they won’t receive the reimbursement, or they don’t know that they can request a reimbursement.

But filing claims to receive reimbursement for fraudulent returns has another benefit: it alerts Amazon to customers who abuse return policies. Amazon has been known to ban customers for just this reason.

Read our article here for how to associate order IDs with Amazon FBA returns.

By filing legitimate and well-researched reimbursement claims, you can help yourself, other sellers on the marketplace, and all other Amazon customers. Additional expenses like shrinkage are usually passed onto customers in the form of higher prices.

Check your refunds and returns reports to see if there are any discrepancies like refunds with no returns, and inspect your returns to see if there is any fraud.

Scammers have gone as far as swapping out the insides of electronics in order to bypass inspection.

Fulfillment Fees

Amazon sometimes gets the dimensions of products wrong. When this happens, you’ll pay more for FBA fulfillment fees.

Requirements for small standard-sized products are:

Any packaged item with its longest side 15 inches or less, its shortest side 0.75 inch or less, and its median side 12 inches or less.

It’s $2.41 for products 10 ounces or less and $2.48 for products between 10 – 16 ounces.

The next tier is large at $3.19 for products that are 10 ounces or less.

If your product exceeds those requirements by a little bit, then look into ways you can redesign your product or packaging so that they can take advantage of the lower rates.

Alternatively, confirm that you’re being charged the correct FBA fees and request reimbursements and scans for products that should belong to a lower size tier. Even a 7¢ difference adds up quickly if you’re selling thousands of items a month.

Be sure to check the product dimensions on the listings to make sure they’re correct as well.

New sellers sometimes enter the wrong dimensions when creating listings, and these dimensions can result in very high FBA fulfillment fees.

Reimbursements

There are numerous instances where you can and should request reimbursements from Amazon.

You’ll want to do the research and be prepared with all the information necessary so that you can expedite the reimbursement process.

This includes having invoices from your suppliers, pictures showing damage, shipping weights, and transaction IDs.

Look into your fulfillment reports and see if any of the cases below apply to you. If so, you can request a reimbursement from Amazon.

These are only the more common reimbursement cases and by no means is this a complete list.

  • Missing or damaged products during inbound receiving
    • If you constantly have damaged products, consider how you’re packaging your inbound shipments or product packaging
  • Customer refunded but failed to return products
    • This does not apply if you have returnless refunds enabled
  • Missing or damaged inventory at fulfillment centers
    • View your inventory reports for more detailed information
  • You were charged for the entire refund even though the customer refunded your one item on the order
    • For example, a customer ordered your product at $20 and a few other products totaling $100 and you had $100 deducted from your account instead of $20

Check out our article on Amazon reimbursement services or tools that can help. Be wary about having automatic submissions, as some sellers have been suspended for submitting too many unsupported reimbursement claims.

Be sure to research any potential reimbursement claims before you submit them.

Keep in mind that Amazon sometimes reimburses you with cash only to take back the cash when they later find the product. In these cases, you’ll see a reimbursement reversal on your settlement.

Storage Fees

In 2019, Amazon changed the way it handles its long-term storage fees (LTSF). Now you’re only charged LTSF if your product has been at fulfillment centers for more than 365 days.

Products in the small and light program still have LTSF for 181-365 days and a higher rate after 365 days.

If those products aren’t selling, then you’ll want to create removal orders to avoid higher fees.

Amazon usually has free inventory removal days every year, so you won’t have to pay the 50¢ per-item return fee.

If you’re not careful, storage fees can accumulate to a point where they far exceed the cost of the item. Sellers who sell used books may be more vulnerable to this since some books can take longer to sell.

If you take advantage of free inventory removals, there’s usually a waiting period before you can send those products back to the fulfillment centers.

The waiting period can be as long as 3 months (if you remove your inventory during the promotional period before Q4).

Whether you sell a few products a month or a few thousand products a month, reviewing your Amazon account for unusual fees and reimbursements is worthwhile.

For bigger sellers, someone who handles reverse logistics and monitors accounts for potential reimbursement cases can easily recover enough funds to make the position worthwhile.

If you like this article, read others on our articles page, or check out the links below.

UPS eFulfillment vs. Amazon FBA for Order Fulfillment

Interested in UPS’s new eFulfillment service? The service allows you to fulfill orders for 21 marketplaces, including major ones like Amazon, eBay, Etsy, Shopify, and Walmart!

Features and services are likely to change. Please check the UPS eFulfillment website for latest pricing and features, as figures used in this article may have changed.

Let’s take a look at the features of UPS eFulfillment and how the costs compare to Amazon FBA.

Benefits of UPS eFulfillment

  • Manage inventory and orders in one place
  • Same-day fulfillment up to 5pm on 1-day, 2-day, and 3-day service
  • Supports 21 marketplaces, including Amazon
  • Simple, bundled pricing

Costs

At the time of this article, UPS charges $0.93 per cubic foot per month for storage based on size and average inventory.

In addition to storage costs, rates are divided into three zones, A, B, and C, and fulfillment costs are based on weight. Take a look at the costs for UPS eFulfillment.

For example, the price for two-day shipping for a 1 pound item to zone A is $8.19 ($7.84 base rate + $0.35 per pound).

Shipping to Canada is also available.

UPS currently has a 60-day trial where the minimum monthly fee of $1,000 is waived. Once that trial period ends, users will pay whatever their shipping fees and storage costs are for the month OR $1,000, whichever is higher.

With our sample shipping cost of $8.19, you’d have to ship approximately 4-5 orders per day to go above the $1,000 monthly minimum.

Amazon FBA vs. UPS eFulfillment

Costs will vary based on what products you’re selling and how long they sit before they sell.

To start, Amazon’s storage fees begin at $0.69 per cubic foot and go to $2.40 per cubic foot during Q4 for standard-sized products. You’ll also have increased rates for long term storage (after 365 days).

UPS doesn’t have a long term storage fee, nor is there a higher storage fee for Q4. The rate of $0.93 per cubic foot per month is fixed.

To fulfill an order for an iPad Mini 4 case, FBA costs $2.41. Amazon shoppers generally expect fast delivery, and Prime members usually get 2-day shipping.

UPS eFulfillment would cost $8.19 for the same 2-day service.

The difference in cost is significant for smaller and lighter items. But heavier items shipped through UPS may be cheaper, depending on the location.

For instance, a 20-pound tire that measures 25 in x 25 in x 9 in would cost $15.10 to fulfill through FBA (small oversize rate of $8.26 + $0.38 per pound above the first 2 pounds).

UPS eFulfillment would cost $14.84 for 2-day shipping to Zone A.

Of course, there are other considerations. For instance, FBA handles all customer service, but some sellers may prefer handling customer service for more complex products.

Conclusion

There are other considerations when deciding on a fulfillment service like inbound shipping costs, removal fees, and other processes like damage and lost products at the warehouse.

Do the calculations to see if using UPS eFulfillment makes sense for your business.

Even if the fulfillment and shipping fees are slightly higher, sellers on multiple marketplaces may still save money overall by using one integrated service.

Don’t forget that you can still use Amazon to fulfill orders from other marketplaces through Amazon’s Multichannel Fulfillment service (MCF).

Streamlining your fulfillment to one service may actually save you money. Your employees won’t have to learn multiple processes. As a result, you’ll make fewer mistakes due to having one service provider instead of multiple ones.

Read these related articles on shipping and fulfillment:

Amazon to Require Amazon Labels for Specific ASINs

Amazon will require FBA sellers use Amazon labels for specific ASINs starting on January 25, 2019.

Any new shipments to fulfillment centers will require Amazon labels instead of simply using the manufacturer’s barcode. Sellers who are affected by this change should have received emails.

If you already have shipments going into warehouses prior to this date, then you won’t have to change anything. But any new shipments on or after January 25 will require labels.

Take a look at our article on popular direct thermal label printers on Amazon to see if one works for you. If you prepare thousands of units per month, you’ll likely want a commercial label printer. One popular brand that you can start looking at is Zebra’s line of industrial printers.

Alternatively, you can pay Amazon a 20¢ FBA Label Fee for each unit.

But the time savings from having to purchase labels, printers, and ink, as well as fiddle with settings, may be worthwhile for some sellers.

Why might Amazon require sellers to use Amazon labels for specific ASINs?

One reason why Amazon may be requiring Amazon labels on FBA inventory is due to counterfeit products.

Fraudulent sellers could send in counterfeit products with the manufacturer’s barcode for commingled inventory. These sellers were able to disguise their fake products because of how commingled inventory works.

Commingled inventory meant that inventory closest to the customer was used to fulfill orders regardless of who sent it in. The result is that a counterfeit product could be sent to the customer even when the seller shipped authentic products to a fulfillment center.

Conversely, Amazon could fulfill the counterfeit seller’s orders with an authentic product.

When the customer who received a counterfeit product inevitably returns the product, Amazon may penalize the seller with listing suppression, suspension, or marks against the seller’s performance metrics. A suspension would likely take the seller days to correct, resulting in labor, time, and loss of sales.

Meanwhile, the counterfeit seller may still be able to operate freely since customers received authentic products.

Using Amazon labels on all products will protect sellers from certain fraud. If you’re a manufacturer or a Private Label seller, you may want to consider Amazon Transparency to further protect your brand and inventory.

See what other seller fee changes are happening in 2019.

Mexico 3PL Third-Party Logistics and Fulfillment Services

Sellers who want to expand into Mexico will face the same issues other sellers face when selling in a foreign country: cultural and linguistic barriers, customs, and taxes. Check out these fulfillment services below if you’re looking for a 3PL provider in Mexico. These businesses offer third-party fulfillment and warehouse services in Mexico. Some may offer FBA services as well. Keep in mind that you may still have to provide customer service if you’re not using FBA. SellerZen is not affiliated with any of these services, nor does SellerZen endorse any of these services. We’ve created this list only for informational purposes, so do your own due diligence before you sign up with any services listed in this article.

America Ship

America Ship
  • Receiving
  • Forwarding
  • Fulfillment
  • Returns Management

Amerisa Logistics

Amerisa Logistics home
  • Warehousing and Distribution
  • Freight and Transport
  • International Logistics and Customs Clearance
  • Order Fulfillment and Packaging
    • Product Assembly, Packaging and Labeling in Compliance to Mexican Standards
    • Distribution, Reverse Logistics, Examine and Process Returns, and Exchanges
    • Kitting and Assembly Services
    • Customized Solutions

CEVA Logistics

CEVA Logistics
  • Contract Logistics
  • Air Freight
  • Ocean Freight
  • Ground
  • Supply Chain Solutions
    • Solution Design
    • Logistics Service Contract
    • Supply Chain Management and Technology
    • eCommerce and Omni-Channel Fulfillment

Estafeta USA

Estafeta Home
  • Ecommerce Fulfillment
  • Warehousing
  • LTL Shipping
  • Courier and Packaging Services
  • Export to Mexico
  • Air Freight

Logistics+

Logistics+ Landing
  • Customs Brokerage
  • FBA Prep and Storage
  • Warehousing
  • Fulfillment
  • International Shipping
  • Returns Management
  • Linguistic Solutions

XB Fulfillment

XB Fulfillment
  • Pick / Pack / Ship
  • Parcel and Palletized Distribution
  • Stock Replenishment
  • Returns Management
  • Trans-loading and Cross Docking
  • Crating / Cartonization
  • Cross-border Logistics
  • Cello Wrapping / Shrinkwrapping
  • Break Bulk
  • Inventory Management
One of the difficult aspects of finding a 3PL or FBA prep and ship provider is the language barrier. You may find more FBA prep services in Mexico if you’re fluent in Spanish. Many of these 3PL providers also have warehouses and offices in the US, and they’ll take care of customs for you as well. Check out our massive list of 3PL services or see how these FBA prep services in China can help you send inventory straight into fulfillment centers in the US.

Amazon Starts Collecting Connecticut Sales Tax December 1, 2018

Amazon will begin collecting Connecticut sales tax on behalf of FBA sellers starting December 1, 2018.

Since the South Dakota v. Wayfair ruling on June 2018, many states have enacted legislation requiring online marketplaces like Amazon to collect sales tax. These new laws require marketplace facilitators like Amazon and remote sellers to collect and remit sales tax.

Other marketplaces like eBay and Etsy have also started to collect and remit sales tax on behalf of their sellers.

If you’re an FBA seller, then Amazon will start to collect Connecticut sales tax on December 1, 2018. Connecticut will join these other states in requiring marketplaces to collect sales tax:

  • Minnesota
  • New Jersey
  • Oklahoma
  • Pennsylvania
  • Washington

If you’re using SellerZen to automatically sync your Amazon account and import orders into QuickBooks Online, then you’ll have to configure sales tax agencies in QuickBooks Online so that our platform can properly process these orders.

If you’re not automatically tracking these Marketplace Taxes through SellerZen, you may want to track them manually in QuickBooks Online. Whether you track these marketplace taxes automatically or manually, you’ll be able to run a report to see how many transactions and how much in sales you’ve done for each state.

These reports in QuickBooks Online will serve as a record in the event anyone requires the information.

View our guide for setting up sales tax in QuickBooks Online.

Click here for a direct link to the PDF for Connecticut’s sales tax legislation regarding out-of-state sellers on pages 2-3.

For out-of-state, including internet sellers, the PDF states:

The legislation changes the nexus standard, so that out-of-state retailers that regularly or systematically solicit sales of tangible personal property in Connecticut must collect and remit sales tax if:

1. Their Connecticut sales exceed a threshold of 200 transactions during the preceding twelvemonth period (ending September 30) (previously, the threshold was 100 sales);

and

2. Their gross receipts are $250,000 or more during that twelve-month period.

Other states will have different legislation regarding thresholds for remote sellers.

Some states have already enacted similar legislation with effective dates that will begin within the next few months. As their laws go into effect, you’ll need to add those tax agencies in QuickBooks Online if you use SellerZen.

If you sell on any major online marketplace like Amazon and eBay, then you’ll want to consult with your tax advisor sooner rather than later.

See our consolidated list of all the states and their remote seller and marketplace facilitator start dates.

New York and New Jersey 3PL FBA Prep and Ship Companies

This article goes over New York and New Jersey 3PL FBA prep and ship services. Many Amazon sellers don’t want to deal with the investment required to get a warehouse and hire employees. Employees increase costs and time. Having to schedule, train, hire, and manage employees can be a big time sink for many small businesses. So it’s no surprise that third-party logistics (3PL) companies are popular amongst Amazon, eBay, and ecommerce sellers.

The fees that many of these 3PL services charge to prep and ship products to Amazon FBA fulfillment centers is negligible compared to the costs of a warehouse, employees, and all the associated expenses.

If you’re near New York or New Jersey or you’re looking for a warehouse in either of these states, then check out these 3PL FBA prep and ship companies below.

We’ll list the features from each website to save you time.

Most of these fulfillment companies offer the same basic services, so you won’t go wrong with choosing one over the other. Don’t let the lack of bullet points scare you. If all you need is a basic prep and ship service, then most, if not all, of these 3PL services will be great for you. If you need additional services, then you’ll have to research further.

SellerZen is not affiliated with any of these services, nor does SellerZen endorse any of these services. We’ve created this list only for informational purposes, so do your own due diligence before you sign up with any services listed in this article.

New York

3P Shipping & GyftGo – South Farmingdale, New York

3P Shipping Home

GyftGo Home

3P Shipping

  • Ecommerce warehouse
    • Shopify shipping
    • Third-party fulfillment
  • FBA Prep
    • Receive and inspect
    • Prep
    • Pack and ship to Amazon fulfillment center
  • Certified refurbishing

GyftGo

  • FBA Prep
    • Receive and inspect
    • Prep
    • Pack and ship to Amazon fulfillment center

Ultimate Packers – Newburgh, New York

Ultimate Packers Home

  • Packaging services
    • Barcodes, labels, or bags
  • Warehousing services
    • Receiving and storing
  • Container services
    • Unloading
  • Returns processing
  • Fulfillment services
  • Other warehouse labor services
    • Photography or repacking

New Jersey

3PL Center – Edison, New Jersey

3PL Center Home

  • Has multiple locations throughout the US and Canada
    • Simi Valley, California
    • Toronto, Canada
    • Vancouver, British Columbia
    • Dallas, Texas
    • Edison, New Jersey
  • Kitting and assembly
    • Packaging, heat sealing, and trade show displays
  • Picking and sticking
    • Pick, print label, and stick it on package or case
  • Pick and pack
    • Separate master cases
    • Package multiple products into single or multiple boxes
  • API available for integration
  • Nationwide LTL
  • Cross-docking

Best Logistics Global – South Brunswick, New Jersey

Best Logistics Global Home

  • Locations on the coasts of the US
    • Chino, California
    • South Brunswick, New Jersey
  • Ecommerce fulfillment
  • Reverse Logistics
    • Inspect
    • Repack and restock
  • Deconsolidation / Cross-docking
  • Distribution services
    • Online to Offline
  • Cross-border transportation
  • Value-added services
    • Repacking
    • Bagging
    • Labeling
    • Inspection

Eastern Prep Service – East Hanover, New Jersey

  • FBA Prep
  • Receive and inspect
  • Label
  • Outbound boxes and dunnage
  • Expiration date labels
  • Cover barcode
  • Carton labels
  • Add-on services available
    • Poly bag
    • Price tag removal
    • Tape open ends on poly bag
    • Inspection and resealing

FBA Terminal – Passaic, New Jersey

FBA Terminal home

  • FBA prep
    • Receive and inspect
    • Label
    • Bag
    • Sticker removal
    • Dunnage
    • Shipping to Amazon
  • Freight forwarding
    • Palletizing

Forest Shipping – Jersey City, New Jersey

Forest Shipping Home

  • Location in Shenzhen, China
  • Sea Full Container Load (FCL) and Less than Container Load (LCL)
  • Courier and Air service
  • Barcode and label service
  • FBA product photography
  • Short-term storage
  • Warehouse receiving
  • Resell products in closed accounts
  • Inspection services

Swan Packaging Fulfillment – Wayne, New Jersey

Swan Packaging Fulfillment Home

  • Fulfillment services
    • Direct to consumer
    • Business to business
    • List mailings and distributions
      • Subscriptions, marketing, sampling program, etc.
    • Returns processing
  • FBA prep
    • Prep services
      • FNSKU label, polybagging, bundling, kitting, warning labels, etc.
    • Multi-channel fulfillment through FBA
    • Seller Fulfilled Prime
    • International import
      • Air shipments
      • Sea FCL and LCL shipment
      • Freight forwarding
  • Packaging and assembly services
    • Kit assembly
    • Shrinkwrap
    • Bill of materials management
    • Complex kit assembly
    • Automated packaging
  • Warehouse and inventory management
  • Ecommerce integration

Like this article and want to see articles for other Amazon-related services? See our comprehensive list of Amazon services, tools, and integrations. Or check out these articles:

Handling FBA refunds and returns in QuickBooks Online

Handing Amazon FBA refunds and returns on QuickBooks Online may seem like a straightforward process, but it can become complicated under certain scenarios. Amazon sometimes issues refunds before customers return products. Or customers will return an item that is damaged and no longer sellable. In these situations, you’ll have to account for the product in some way.

It would be inaccurate to create a refund document in QuickBooks Online when Amazon refunds without the return since that would increase your inventory count. That’s because refund documents in QuickBooks Online increase your inventory since it assumes you’ve received the product back.

Since you’re using Amazon FBA, creating a refund receipt isn’t accurate since sometimes no inventory was returned to the fulfillment center. By creating refund receipts for all your Amazon refunds, your QuickBooks Online inventory quantity will be incorrect. If you’re fulfilling orders on several marketplaces, then the incorrect count can lead to costly delays for your business.

You’ll end up selling inventory that you don’t have. What’s worse, your employees may end up selling used and returned stock as new for those products that were returned but not thoroughly inspected. The last thing you want is negative feedback caused by canceled orders or item not as described returns.

How does SellerZen handle Amazon refunds in QuickBooks Online?

SellerZen’s automated import service creates the proper documents for all Amazon transactions, including refunds and returns. That way, you’ll always have your inventory count correct for the connected marketplace, even for cases where products are returned 60 days after refunds are issued.

For Amazon refunds, we’ll not only create the refund receipt for the returned product, but we’ll also check to see if the customer returned the order. If no returns are found, then we’ll create the proper Vendor document to adjust your inventory on hand.

We do this to offset the increase generated automatically by the refund receipt. We’ll later generate the proper documentation if the customer returns the item and it’s added back to your FBA inventory for sale. No matter what happens, we’ll always have your Amazon inventory reconciled so that you can focus on growing your business instead of reconciling Amazon FBA refunds, returns, and QuickBooks Online inventory.

How does SellerZen handle Amazon FBA refunds and returns?

SellerZen creates a sales receipt for instances where refunds are issued but no returns are found. We do this because you’ve received nothing from the sale, and the sales receipt removes one inventory. Essentially, you’ve “sold” one item for nothing. Any other amount here will result in inaccurate reporting because the product is a loss at this point until the customer returns it.  The other accounts, like your Sales of Product Income and your Cost of Goods Sold, are adjusted properly as a result of the sales receipt.

Without the sales receipt, all refunds would increase your inventory count. Over time, this can lead to a significant inventory discrepancy since not all refunded orders would be returned and in sellable condition.

If the customer later returns the product and it’s in a sellable condition, then we’ll create the right QuickBooks Online document to adjust your quantity on hand. That way, your QuickBooks Online inventory will remain synchronized with your current Amazon FBA inventory.

This kind of accurate reporting is necessary to reconcile your inventory counts on QuickBooks Online with Amazon. Of course, manually processing refunds and returns can be a tedious task since you’ll have to run return reports to see what, if any, items were returned in sellable condition. And you’ll have to do this on a fairly regular basis since customers have 30 days or longer to return an item. We’ve even seen instances where customers returned items several months after they were refunded, prompting Amazon to reverse their reimbursement.

All of these cases can prove frustrating to track on Amazon when you’re selling hundreds of items a month. By using SellerZen’s automated service, you can rest assured that all your connected marketplace transactions are precise. And the best part is that all of these order-related transactions will cost you nothing since we only count the initial order.

Keeping your QuickBooks Online company and your Amazon seller account synchronized and in harmony is not an easy task. For many small business owners, this task alone requires a bookkeeper or a well-trained data entry clerk, but even they can make mistakes. Using an automated service like SellerZen can guarantee quick, accurate documents and reduce downtime caused by human errors.

Amazon’s Massive Growth Creates Opportunities for Small Businesses

You sell it. They ship it. Amazon has proven extremely successful at creating and expanding one of the world’s most advanced fulfillment networks. The best thing about Fulfillment by Amazo (FBA) is that just about anyone can reap the benefits of Amazon’s expertise–it’s simpler than starting a traditional retail business. FBA means that all kinds of small businesses can store their products in an Amazon fulfillment center. Then, when each one sells, Amazon will pick it, pack it, and ship it. And they’ll even provide customer service. The cost of this is less than what it would be for a traditional retail business.

Amazon is the country’s leading e-retailer, boasting almost 178 billion USD in net sales for the year 2017, and sales show no signs of slowing.

Amazon’s Share of Online Business

Business as usual at Amazon means yearly growth, and their online retail business is no exception. In fact, Amazon is responsible for approximately 44 percent of all of 2017’s U.S. e-commerce sales and around 4 percent of the total retail sales in the entire country. While ecommerce sales remain a fairly minimal part of U.S. retail, the segment is growing rapidly with Amazon leading the pack. Ecommerce sales are projected to increase 15.8 percent, reaching $452.8 billion by the end of 2017.

Third Party Sellers

Although the majority of Amazon’s revenues come from retail sales, third-party seller revenues run a close second, followed by AWS, and then subscription services. Active customer account figures for the first quarter of 2016 showed that the company had more than 310 million of them worldwide. Now, that figure is certainly more. Since the company also possesses amazing global scope and reach, the Amazon brand is considered to be one of the most valuable in the world. With that many active customer account holders, Amazon’s marketplace is a valuable resource for many businesses.

FBA & The Rise of Ecommerce

Amazon’s broad scope and reach have made it a household name in the US. Their fast delivery, easy returns, and exceptional customer service have made Amazon a trusted name. Amazon also holds their marketplace sellers to the same standards. These seller expectations not only increase customer trust in the company, but they also increase customer spending. The Amazon name naturally gives potential customers a lot of confidence when they shop online, regardless of whether their purchases come from third-party sellers or Amazon itself.

Retailers’ Online Growth

Other online retail giants include Walmart.com, Jet.com, and Target.com. All in all, U.S. e-commerce sales saw a 16 percent growth in 2017. In fact, online retail sales in the U.S. saw more rapid growth than any year since 2011. Overall, e-commerce represented 13 percent of the total 2017 retail sales, as well as 49 percent of the growth. Of course, Amazon was responsible for the majority of those gains.

Shopping online is becoming more normal rather than the oddity it was less than a decade ago. For many customers, online shopping has even replaced traditional physical brick and mortar stores. Younger shoppers no longer want to deal with coupons, search for products in a vast store, and waste time waiting in line. For these shoppers and those who come after, shopping at a physical store may be the exception rather than the norm. This will be especially true if Amazon manages to bring to delivery the same efficiencies it brought to its fulfillment. And this is looking to be the case with its plans for its drone delivery and potential shipping plans.

Grocery Ordering and Beyond

When people think about Amazon, they think about a large online marketplace with fast delivery and excellent customer service. However, Amazon is more than just a marketplace. Amazon Prime members also enjoy video subscriptions, amongst other small perks. But Amazon is more than just an online retail store.

From cloud-computing resources to groceries, Amazon is poised to disrupt other spaces as well. Amazon’s Handmade sellers compete directly with websites like Etsy, while Amazon Professional Services allows small business owners to sell their services. Amazon isn’t content to stop there. Rumors of an Amazon partnership with a healthcare company may disrupt the healthcare industry.

What all of this means for marketplace sellers is that they’ll see more traffic to their products. From that traffic, they’ll see more sales. Amazon’s expansion and growth will only create more opportunity for individuals and small businesses. And not all of these opportunities are related to sales.

Some Serious Reasons Why You Should Avoid FBA

Amazon FBA can be a boon for small businesses. It’ll reduce the need for you to handle picking, packing, and shipping. You’ll also be able to offload customer service like processing customer returns. Better yet, you won’t need to stack mountains of product around your house, creating a maze of dangerously tall towers. Nor will you need to rent out expensive warehouse space.

What’s the catch with FBA? The service may seem too good to be true–you’ll be able to automate your business to a certain degree, and you’ll save time and money on labor.

Nevertheless, there are some serious reasons why you should keep in mind when you’re thinking of taking the FBA plunge, and those who don’t do proper research may end up losing their investment.

Gated categories or category restrictions

Let’s say you’re selling a product in a category that isn’t gated or restricted by Amazon. You’ve tested the waters and know that the item sells a healthy number per month. You’re ready to take the plunge and order tens of thousands of dollars more from your supplier to sell through FBA. While Amazon processes your shipment, you wake up one morning to an email about the suspending listing. You may be required to provide invoices, prove a business relationship with the brand owner, or submit some forms for safety or some other reason. Or Amazon may have decided to prevent you from selling that item for whatever reason. Even if you’re PL, the product you’re selling may face new safety requirements such as UL, FDA or other conditions.

You may think that there’s no way this will happen to you, but hundreds, perhaps thousands of sellers woke up to such a situation throughout 2016 and 2017 due to Amazon’s restrictions on music, DVD, book, and other categories. In some cases, sellers were unable to sell as Used – Like New, while in other cases, the entire category was restricted to brand owners and their authorized resellers, forcing smaller sellers to create removal orders and list on other platforms. Sellers of lights and items including batteries found new UL and battery restrictions.

Now you have thousands of dollars worth of inventory sitting in a warehouse that you can no longer sell on Amazon, and you’ll have to pay for storage and removal fees. Your inventory is now in limbo until Amazon ships it back to you.

Without FBA, you could simply sell your product on another venue without waiting while you appealed the suspension or product listing. Or you can get UL certification while avoiding those storage fees.

One last reason to consider is that Amazon will not take specific products in their fulfillment centers. These products may include hazardous materials like lithium batteries. You’ll receive a message when you list your items for FBA if this is the case.

Commingled inventory

If you use this option for FBA because you believe that it’ll be faster since you won’t need labels (you’ll use the manufacturer barcode instead), you may be in for some big surprises. Commingling inventory means that the stock closest to the buyer will ship regardless of who the product belongs to, so if your commingled item is on the west coast and an east coast buyer orders it, the same commingled item from the east coast warehouse will ship.

The benefit of commingled inventory for buyers is that all items arrive at the buyer’s location quicker, a critical factor for many buyers who expect 2-day shipping. You’ll also avoid having to cover up the manufacturer UPCs with your own FNSKU labels. Commingling saves a little bit of labor and materials.

Where people get into trouble is that the commingling of inventory means that sellers who commingle their counterfeit items may affect you as well. If a seller commingles inventory and uses fakes, then your customers may potentially receive those counterfeit items. When buyers ultimately open an Amazon complaint, then Amazon suspends you for selling counterfeit items. A false claim can be a massive headache, as your selling privileges and settlements are frozen until you can prove that your products are authentic.

Commingled electronics are often easily faked, and many scam sellers will do just this. They’ll print authentic UPCs on their fakes and send them to Amazon as commingled. Then when Amazon fulfills orders, anyone with the same item will suffer the consequences of counterfeit inventory.

Amazon picking, packing, and fees

Amazon FBA is excellent in that it handles the picking, packing, shipping, and customer service, but that means that all of these aspects are out of your control. You can quickly check how much Amazon charges for FBA so that you can compare how much it’d cost you. Here’s their current pricing as of February 2017 for January-September, and there’s no guarantee that Amazon won’t change its pricing again next year (or next month).

The one drawback is that you’ll lose control over the whole process. When you handle picking and packing, you can ensure that customers will receive their items in new condition, and because you’ll know your product, you’ll be aware of any issues when you get the item for packaging. Amazon warehouse workers may not necessarily be knowledgeable, nor may they care, about your item if they notice that some damage has taken place somewhere along the process. For example, warehouse workers shipped apparently damaged items in some cases.

Similarly, you’ll lose control over the packaging. While Amazon does a decent job overall, the workers do make mistakes. If your item is an expensive electronic, then workers may throw it into a bigger box. The result is that you’ll get more returns and complaints, resulting in hits to your seller metrics.

All the fees may eat into your already razor-thin margins, and you may discover that hiring a worker or doing some of the packing and shipping yourself may be a cheaper alternative. At the very least, you can control the quality of the product going out, and you can avoid scams from other sellers.

Returns

While Amazon FBA handles all refunds, they don’t often check the condition of the item. In some cases, sellers have reported that customers have returned used or damaged items, and FBA has resold it as new. FBA then ships the used or damaged item to another customer. The result is a complaint and a hit on the seller’s metrics. If you have a lot of sales, then these kinds of problems can build up quickly, resulting in a suspension of your account.

When you use FBA, you essentially give up control of that product. Amazon may decide to refund buyers for items outside of the return period, or they may have issued a refund for any other reason. Because they handle customer service, you don’t have much choice in the matter. Whether or not you’re on the hook for these returns is unclear, though most sellers have received reimbursements for such cases. If you fulfill your orders, then it’s clear that a return request from 3 months ago should be denied unless you have some warranty or generous return policy.

Lost, misplaced, or damaged inventory

There are so many processes that go on when using FBA. You’ll have to deal with a shipping carrier, multiple warehouses, and different workers processing your inventory. At any time during this process, your products may be lost, misplaced, or damaged. Many sellers report that the number of items they send in sometimes doesn’t match what Amazon receives. While sellers can file a claim for reimbursement, Amazon doesn’t always pay for the cost of the inventory–they may replace the product instead (in some instances damaged, customer returns, or no longer saleable).

These other potential issues with FBA aren’t necessarily widespread, but they do occur with some regularity. We’ve listed them below because they don’t warrant a more thorough discussion.

  • FBA picking, packing, and shipping the wrong item(s)
  • Hit on seller performance metrics when it’s FBA’s fault (incorrect shipping, long ship times, etc.)
  • Delays and other issues when shipping to Amazon warehouse and processing products
  • Inadequate or non-existent reimbursement for damage or mistakes caused by Amazon
  • Fulfillment centers fudging numbers in the hopes of avoiding liability for damage

For many of these issues, it’s difficult to tell whether the fault lies with the seller or with Amazon. For instance, processing delays could be a result of inappropriate or incorrect labels placed on products. These are issues any business would have to deal with, but the problem is that you’re at the whim of the fulfillment centers when using FBA. Responses to emails may take days or weeks, and resolutions can take months to resolve if you’re lucky.

Regardless of these drawbacks, there are numerous benefits to using FBA. This article only focuses on the issues sellers have experienced using FBA. As always, you should do your research before you decide on a course of action. FBA has automated a lot of the processes for small sellers. Not having to pick, pack, ship, and deal with customer service frees businesses to increase their sales volume and reduce labor costs. If you price your products properly, then these losses aren’t as damaging. Unfortunately, the customer has to pay a higher price because of Amazon’s errors.

The basics: What are FBA, FBM, and SFP?

Ecommerce is filled with acronyms and going to review three important Amazon ones here.

First, the basics. FBA stands for Fulfilment by Amazon, a service provided by Amazon to handle the customer service and shipping of the seller’s products. Since Amazon is taking over the hardest part of logistics, sellers can benefit by streamlining their operation and reducing overhead costs.

FBM stands for Fulfilment by Merchant, and it’s self-explanatory: the seller handles the selling and shipping of the products. The seller lists the item on Amazon, provides customer service, and ships the order from his warehouse.

SFP stands for Seller Fulfilled Prime, and it is a hybrid program that allows sellers to participate in the Amazon Prime program by quickly fulfilling and shipping orders for Prime customers.

It is also sometimes referred to as Merchant Fulfilled Prime or MFP. The benefit of SFP is that items receive the Prime badge and listings are more likely to win the Buy Box. The requirements for qualifying for SFP are very high, but the benefit is that sales will increase due to the faster shipping offered by Prime.

With those three acronyms out of the way, how do you know what service is best for you?

Ideally, you’ll want to automate and streamline your business as much as possible. For that reason, we recommend FBA because it reduces the need to handle customer service and fulfillment. You only need to ship your inventory to an Amazon fulfillment center, and Amazon handles the rest.

There are even services that will prepare your products for Amazon fulfillment centers, leaving you free to develop your business. FBA will free you from having to pack and ship the orders, and you won’t have to worry about having warehouse space to store all your inventory.

But there are instances where FBM and SFP may be necessary. Amazon fulfillment centers will not take any product with hazardous materials, and their hazmat review can be rigorous.

If this is the case, then you’ll have to go with FBM for hazardous materials. You can win the Buy Box by participating in SFP if your metrics are good enough. SFP will give you several benefits: a higher chance of winning the buy box and the Prime badge.

FBM can also be useful for high-end items. Due to the high number of scams for electronics like Apple iPhones, you should seriously consider FBM so that you can control the returns process. Otherwise, Amazon may refund a fake return like an iPhone 7 swapped out for an iPhone 4).

Although Amazon may reimburse you for these cases, it’s still a frustrating process to put in a removal order, check the item, and then file a claim with Amazon. Even then, there’s no guarantee that Amazon will refund the scam, and you’re out the cost of the item, along with time and fees.

Prime eligibility has some very high standards. Prime members expect fast shipping. Often, you’ll be required to pay for 2-day shipping or overnight shipping to guarantee quick delivery and maintain your metrics. Even for light items that are a few ounces, you’re going to be spending a lot of money on shipping.

You’ll want to be sure to get the shipping rates for your item before you decide on SFP. The high cost of shipping alone makes SFP worthwhile only for products that have a high margin. Additionally, any delay in the order processing, like an employee absence will easily hurt your metrics.

Whatever you decide, you’ll want to do your research and pick the method that best suits your business. The last thing you want to do is to jump into a program without doing your research. You could end up making a costly mistake like paying more than expected for shipping for SFP.

Learn more about other Amazon services from our articles below: